M&a

How do you sell your company when you have no money?

Chris Seline

February 4th, 2014

I have a startup (picture search and discovery) with significant user traction (>8 million unique visitors per month) but very little revenue and not much in resources. I think that acquisition makes sense for me right now because a larger company can lend the required resources, ad sales team, and partnerships to take the site to the next level. I have talked to a few m&a firms but they want big retainers to take on the case.

How do you sell your company without those m&a firms? Are there smaller, hungrier m&a firms or individuals that take cases like this on a performance basis? How do I find those people? Should I put together an info packet and just blast it out to companies I think might be a fit?

Conway Anderson VP of Product at Academia.edu

February 4th, 2014

I ran this by two of my friends who have recently done some deals in the UGC category for a second opinion. There are three things that are going to make selling this to a traditional large co either impossible or very difficult. 

1) Only 15% of your traffic is from the U.S. with India & Indonesia following. 
2) You have decent amount of spam and NSFW content being uploaded. 
3) Lack of mainstream hype. 

Those three things combined with an overall erosion of the consumer advertising market put you in a tough spot. I'd estimate that to the right buyer you are only looking at low to *maybe* mid 6 figures despite your high traffic numbers. 

That said, just like with the domain market you are worth what someone else is willing to pay. That estimate is just based on recent deals I have seen. 




Jeff Whelpley CTO at GetHuman.com

February 4th, 2014

Wow, first of all congratulations on building a product that so many people love. Regardless of anything else, over 8 million unique visitors a month is significant.

As far as how to sell your company, I don't have an direct experience with your situation, but one thing I would suggest from seeing other companies like yours is not to just blast out an email. You would likely be better served trying to connect with partners/buyers yourself (without any other firm at first).

Ahmad Zahran Non-Linear Thinker | Strategist | Entrepreneur

February 4th, 2014

Have you thought about bringing in a seasoned entrepreneur as CEO? Someone who has a track record of monetising startups and also has strong contacts in the VC world and has raised money? You may have to give up a considerable chunk of equity but if they can grow the business and bring in funding may be better off than selling now. Its probably easier said than done but it may be an interesting alternative to consider. Ive seen it done before with great results.

Dave Lemley Consulting Technologist

February 4th, 2014

have to second Ahmad.  If your story is compelling enough to pitch well, the VC will help you round out your egg-shaped team.  They typically have EIR at the ready.  Actually, I would think that the VC will find it refreshing that you yourself do not especially want to be CEO, because that's a super common friction point.  Just make sure you like whoever it is.  Getting money but with a partner with whom you are unhappy is not worth it, just go fishing again.

Tim Scott

February 4th, 2014

Here's a recent article about M&A.
http://exitround.com/manu-kumars-4-rules-ma-plus-startups-shouldnt-show-potential-buyers/

Mona Sabet

February 4th, 2014

Hi Chris

First you identify who the companies are that might benefit from acquiring your business.  Ideally, you can come up with about 4-5.  Then you write a short pitch about what value you think you would add to their business.  Then you troll LinkedIn or other networks to try to get a warm intro into someone senior there.   Happy to talk off line.  I used to run M&A at a large software company.

Mona

Kate Hiscox

February 4th, 2014

Hi Chris - I might can help you with this. Feel free to message me if you'd like to discuss further and congrats! Per Jeff, that is no easy thing to do. If you sell the business, great but if you are unable to, never lose sight of the value of the wealth of experience you have learned from building and growing your site. Great job!

Dave Lemley Consulting Technologist

February 4th, 2014

Your having that much user traction is fantastic.  Have you considered /not/ selling?  Have you considered instead raising capital to do the things you mention (hiring) to take it to the next level?  You say you have little to no revenue as it is, will simply hiring those people fix that, or do you also need to come up with a monetization strategy first, that those folks then execute on?
If it were me (and it's not), I'd try to come up with a monetization strategy, and at least execute a little on it to test the model.  Then you should be in a better negotiating position.
On the other hand, if you happen to find someone who already has a strategy in mind, and wants your user base, then by all means sell away!

Chris Seline

February 4th, 2014

Thanks for the feedback everyone! Here are the answers to a few questions:

I am working on a monetization strategy that involves channeling the content into verticals that I think will 1) increase user engagement 2) allow us to filter out nsfw content and 3) lend well to targeted sponsorships/partnerships. I think that will make the site considerably more valuable, but I think executing this with a large company behind it will be much more effective (for ad sales, partnerships, etc). 

I have tried raising money but the overwhelming consensus is that I don't have a well rounded team. I am a technical founder, and very rarely does that sit well with investors.

Conway, at a certain point a site like Twicsy is worth more than a linear extrapolation of its current value per user. The question is, how many visitors do I need? You say Twicsy is worth maybe $500k, but if we had 80 million that has to be worth more than $5m, no? Any idea where that inflection point is? 

FYI, the actual percentage of US visitors per month is 23% according to Google Analytics. Indonesia is indeed at #2, but India is 9th.

Chris Seline

February 4th, 2014

Ahmad/Dave, I have been talking to many people over the past year, looking for a CEO or biz dev guy at the same time as money, and I just never found anyone that made sense that wasn't doing their own thing. Part of the problem is that I am in Washington DC, which doesn't have as much media folks to network with. Getting out and networking in other parts of the country is expensive and time consuming. Doing it by phone is not as effective. I have not talked to a VC that is interested in placing a CEO, but I have heard they exist...